WHEN SHOULD YOU INVEST IN AN OFFSHORE FUND?

Offshore funds have been painted as havens for criminals and tax evasion in the more recent years, however there are many reasons why you would want to invest through an offshore domiciled fund such as Cayman Islands, BVI, Malta, Isle of Man, Bermuda, and others.

Many people that have always lived in a developed country such as the United States or Canada don’t really understand the need for “anonymity”. In many areas of the world, financial records whether it be government regulated or bank records find their way into the general public. This lends itself to many horrible things, as the wealthy families once discovered may become targets for illicit activities. Family members may be taken and held for ransom, they may be extorted or targeted or their business activities hindered. Offshore jurisdictions provide an extra layer of protection with regard to personal anonymity.

In addition, some countries are not stable enough to provide the safety from government takeovers (think back in history to Peru, Venezuela, Hungary, and other types of international situations). We in developed nations take this for granted.

Some countries limit investment activities in such a way as to prevent capital outflows to other countries. There is always an argument to be made to diversify your wealth across different countries and not keep all your eggs in one basket.

Of course, there are some legitimate tax reasons as to why you would invest through these jurisdictions as well. If structured properly, you can avoid double taxation, or having to deal with unnecessary tax filings and administration if there is a treaty in place.

Investing into offshore jurisdictions is not always the answer. The costs to manage such a structure sometimes may outweigh the benefits to investors depending on the size of the fund, counterparties, and jurisdiction of the assets. Certain jurisdictions are heavily scrutinized or even banned for tax residents of certain countries.

Here at Fundviews Capital we can help fund managers launch an offshore tax efficient structure for their non-US taxable investors at a much lower cost than creating and operating it themselves. This alleviates the sometimes hard choice of whether you want to put time and effort into launching such a structure, and allows them to launch with a fraction of the assets it usually takes to make the endeavor worthwhile.

**The above reflects the personal opinions of the author, and is not to be considered investment or legal advice or advice of any kind.